Technology company presses on with monopolization claims

A technology developer could proceed with claims that a competitor “weaponized” the litigation process by bringing sham litigation to monopolize, or attempt to monopolize, the market for complimentary metal-oxide-semiconductor logic embeddable antifuse one-time programmable nonvolatile memory technology. In denying the defendant’s motion to dismiss, the federal district court in San Francisco concluded that res judicata did not bar the antitrust claims and the developer adequately alleged a relevant market and barriers to entry (Sidense Corp. v. Kilopass Technology Inc., December 2, 2015, Illston, S.).

Kilopass Technology Inc. previously filed a patent infringement suit against Sidense Corp. The court, however, concluded that Sidense’s design used in producing memory cells in integrated circuits for electronic devices such as smart phones did not infringe patents for memory devices that retain data even after power is removed. Sidense shortly thereafter stipulated to voluntary dismissal of remaining claims in its business torts case against Kilopass. In the instant action, Sidense claims that Kilopass monopolized, or attempt to monopolize, the relevant market. Kilopass moved to dismiss.

Res judicata. The court first concluded that the doctrine of res judicata does not bar the monopolization claims in the instant action based on the facts alleged in Sidense’s previous business torts case. While it was undisputed that a final judgment on the merits occurred in the business torts case and the parties are identical, the court determined that the antitrust case does not allege the same nucleus of facts asserted in the business torts case. Specifically, the operative complaint in the business torts case alleged that Kilopass made false statements to Sidense’s customers, but the antitrust complaint claims that Kilopass “weaponized” the litigation process in an effort to monopolize the market by forcing Sidense to divert millions of dollars away from its marketplace and technological competition with Kilopass. While the resulting harm might be similar if all the allegations were true, according to the court, the claims do not arise from the same transactional nucleus of facts.

Relevant market. Sidense also adequately alleged a relevant market for complimentary metal-oxide semiconductor logic embeddable antifuse one-time programmable nonvolatile memory technology. In particular, Sidense described the technologies that embeddable nonvolatile memory products are based on, explained how different technologies are chosen, and identified factors affecting the market. These allegations, according to the court, were sufficient to plausibly allege a technology market in which Kilopass and Sidense compete.

Barriers to entry. Lastly, the court found that Sidense sufficiently pleaded barriers to market entry. Sidense claimed: (1) entering the relevant market requires a substantial cost that would deter many firms from entering the market; (2) the time investment required in evaluating the technologies—including the risk that the technology is defective, leading to financial failure or ruin—likely also deters new entrants to the market; and (3) Sidense and Kilopass are the two significant producers in the current relevant market allowing for a plausible inference that buyer preferences between the parties have been entrenched.

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